The Chancellor has launched a stamp duty holiday to help kick start the property market saving buyers thousands for a new home.

Rishi Sunak has introduced a stamp duty holiday with no tax to pay for first time buyers and home movers on purchases up to £500,000 saving thousands on a property purchase.

The new rules apply to property in England and Northern Ireland starting from 8 July 2020 through to 31 March 2021 with Wales and Scotland subject to a separate system.

First time buyers do not pay stamp duty for property values under £300,000 and the stamp duty holiday is likely to benefit homebuyers in London and the South East.

The holiday will benefit second homes and buy-to-let investors although these property purchases must still pay an additional 3% stamp duty surcharge.

Savings you can make buying a home

Until recently, stamp duty land tax was paid by all home movers on property worth £125,000 or more and first time buyers on property worth more than £300,000.

The stamp duty holiday offers savings for everyone buying a home and in particular in London where house prices are more expensive averaging £478,100 according to Zoopla.

The following table shows the level of stamp duty paid by residential purchases for different property values and savings with the new scheme.

Property value	Old	New	Saving
£200,000	£1,500	£0	£1,500
£400,000	£10,000	£0	£10,000
£500,000	£15,000	£0	£15,000
£750,000	£27,500	£12,500	£15,000
£1 million	£43,750	£28,750	£15,000
£2 million	£153,750	£138,750	£15,000

The holiday could allow home movers to trade-up faster as the savings for a property valued at £500,000 would be £15,000 and this could help them increase their deposit.

Homebuyer with properties worth £750,000 would see the stamp duty reduced by 54% from £27,500 to £12,500 although more expensive homes worth £2 million only receive about a 10% saving.

The average purchase price in the UK for first time buyers is £212,528 according to Rightmove with no stamp duty to pay and if they purchase a £480,000 property they save £9,000 of tax.

Older equity release buyers can benefit from the holiday if they buy a more expensive home worth £500,000 or less saving up to £15,000 which could help lower the interest rate for a lifetime mortgage.

What is the purpose of the holiday?

During the lockdown 175,000 homeowners were unable to sell their property and since opening on 13 May the Treasury wants to help the rebound in market activity.

According to Zoopla property transactions have reduced by 50% reducing stamp duty to £4 billion and the holiday should encourage buyers to move home.

There are benefits of a healthy housing market with 5% of the property value spent on home related purchases such as re-decorating, furniture, the garden and technology, boosting the economy.

In addition, current low interest rates can give remortgage buyers the opportunity to release capital which they can use to improve their home such as a new bathroom or kitchen.

Therefore the lost stamp duty tax results in savings that can be spent in the economy and recovered through other taxes such as VAT or income tax.

The highest amounts of stamp duty is paid on the most expensive properties and the South east and London will receive the greatest benefit from the holiday and boost to the local economy.

What are your next steps?

Speak to our LCM mortgage advisers if you are planning to move home, buying your first home, remortgaging your existing home to a new cost effective mortgage deal or are a buy-to-let investor.

Learn more by using the mortgage cost calculators, equity release mortgage calculator and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage brokers can recommend lifetime mortgages allowing you to receive cash from your property for a conservatory extension or buy a more expensive home.